CSCS woo private funds to OTC equity market

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By Taofik Salako

Central Securities Clearing System (CSCS) Plc, the financial market infrastructure for the Nigerian capital market, appeared to be attracting investors to the NASD OTC Securities Exchange, the over-the-counter (OTC) market for trading in the unlisted securities.

Transaction details at NASD and financial reports of CSCS showed the company as one of the three most active stocks on the NASD while it has delivered capital gains of more than 70 per cent over the past two years.

CSCS, the Central Securities Depository (CSD) and settlement institution for the capital market, has proven to be an alternative way for a stable and diversified exposure to the capital market.

Amid the bearish equity market over the past two years, the shares of CSCS rallied strongly, gaining over 70 per cent over the past two years, delivering stellar return to its shareholders. The performance of the stock partly reflected the steady dividend payment culture of the company.

Its recent 70 kobo per share dividend translated to a dividend yield of 5.8 per cent on its closing share price of N12 at the weekend. Beyond the steady cashflow that the CSCS dividend provides to investors, the strong fundamentals of the company has been a compelling attraction to investors.

CSCS recorded a pre-tax profit of N6.1 billion in 2018 and most analysts expected the company to improve on its bottom-line in the immediate past business year ended December 31, 2019.

Market analysts attributed CSCS’s liquidity and pricing performance at the NASD to the company’s strong governance, stable profitability and increasing earnings diversification.

Chief Executive Officer, Central Securities Clearing System (CSCS) Plc, Mr Haruna Jalo-Waziri has said the company continues to record positive revenue growth despite the many challenges in the operating environment.

According to him, the company continues to see exciting growth potential in its businesses while optimizing the capability of its technologies.

“Overall, our capability to process trades has now significantly increased from hundreds of thousands of trades to millions of trades daily.

This development ensures that we stay well positioned to deliver clearing and settlement services across current and future product offerings of the stock exchanges we render services to,” Jalo-Waziri said.

He added that the company has also continued to automate its processes to eliminate manual interventions and improve turnaround time.

He pointed out that with the rapid digital transformation across industries, the company shall be exploring opportunities from emerging innovations with the potential of disrupting various aspects of the financial ecosystem.

CSCS recently introduced a new web-based application that will enhance the interface between the clearing house and companies’ registrars. The new solution, known as Regconnect, provides easier-to-use platform for exchange of information.

Prior to the solution, registrars could only connect with CSCS through a data exchange application that did not have the ability to process the data being submitted.

Now, Regconnect provides an efficiency lever for the capital market, as the application facilitates day to day processes regarding the maintenance of registers, with immediate validation of all data being submitted to ensure the accuracy of records, and in less time.

Key extracts of the audited report and accounts of the company for the year ended December 31, 2018 showed that profit before tax rose by seven per cent to N6.09 billion while gross earnings increased by four per cent to N9.08 billion.

Total assets rose by 12 per cent to N35.9 billion. The company’s pre-tax profit margin improved from 65 per cent in 2017 to 67 per cent in 2018.

Market analysts said investors might be missing out on valuable stocks on the NASD noting that investors seeking for portfolio diversification should not only look across sectors but across the markets and trading platforms including stocks listed on the NASD.

Inaugurated in July 2013, NASD is registered by Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC) as a Self-Regulatory Organisation (SRO).

It provides the platform for trading of a broad range of instruments over-the-counter (OTC), including equities, bonds and other securities not listed on a formal general securities exchange.

Already, many other leading private and unlisted public companies are listed on the NASD. These included Dufil Prima Foods Plc, the manufacturer of Indomie Noodles; Friesland Campina Wamco Nigeria Plc, manufacturer of Peak Milk brand; and Fan Milk Plc, popular manufacturer of Fan Yoghurts, NIPCO Plc, the majority core investor in 11 Plc, formerly known as Mobil Oil Nigeria Plc; Air Liquide Nigeria Plc Industrial & General Insurance Plc, Nigeria Mortgage Refinance Company, Acorn Petroleum Plc, ARM Life Plc, Afriland Properties Plc, BGL Plc, Consolidated Breweries Plc and Food Concepts Plc.

Others included Geo-Fluids Plc, Golden Capital Plc, Niger Delta Exploration & Production Plc, Partnership Investment Company Plc, Resourcery Plc, Riggs Ventures West Africa Plc, Swap Technologies & Telecomms Plc, Vital Products Plc, Fumman Agric Products Industries Plc, Free Range Farm Plc, FAMAD Plc, AG Mortgage Bank, Trustbond Mortgage Bank Plc, Mass Telecom Innovation (MTI ), Providus Bank and Great Nigeria, Insurance among others.

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